Pakistan Telecommunication Company Limited (PTCL) filed a petition with National Electric Power Regulatory Authority (NEPRA) on Friday, for the revision of its power tariff.
PTCL, in the petition, has requested the Power regulator to revise the basis of charging for the company from commercial charges to industrial charges. A move that would lead to an expected 15% to 20% of electricity cost savings for PTCL.
NEPRA’s categorization for tariff
NEPRA segregates consumers based on usage of electricity. The categories include residential, commercial, general services, industrial, single point suppliers and agriculture. The charges for each segment vary according to the time of usage and the DISCO (Distribution Company) supplying the electricity.
Rationale behind the Petition
The telecom sector has been categorized by NEPRA under the commercial segment for more than 20 years. This, according to PTCL, is not an appropriate classification. As the petition states, the Telecom sector was granted the status of an Industry as notified by the Ministry of Industry and Productions (MoIP) back in 2004. Further, the Income Tax Ordinance also defines the sector as an industry.
Power cost issue for the Telco.
Under the current structure, PTCL is being charged a “Two Part” tariff. Through this mechanism the total charges are computed by combining fixed charges on the basis of capacity and variable charges based on actual consumption. This has led to an increase of 40% in the energy costs of PTCL’s exchanges.
This incremental cost has undermined the revenues generated by telephonic exchanges with the company closing approximately 10 exchanges every month. These exchanges are essential for smaller rural districts where this infrastructure allows subscribers to call each other by switching (interconnecting) their lines.
Cost savings
PTCL currently has 7823 connections across 19 regions that consumes around 16-17.0 Million Kwh of electricity per month which costs them approximately Rs340 million. The average costs per unit consumed is around Rs20 while under the industrial tariff it would be around Rs16 to Rs17. This will result in 15%-20% cost savings.
What does it mean for the Telco industry?
As per Reon Energy, “Energy costs for telecom tower operators account for 75-80% of operational expenditures and that could rise to 85-90% in case of low grid coverage.”
Therefore, revision in rates, if approved, might be a significant step towards reducing operational costs for the telcos that are already suffering from low return on investments from their conventional operations.
Hearing for the petition is scheduled on 30th March where NEPRA will decide the reasonableness of PTCL’s demands. Profit has also reached out to PTCL regarding the development. However, the company refused to comment on the matter citing that the petition was still under review.
However as per sources in the industry PTCL isn’t the only Telco that has filed the petition with NEPRA. Apparently, other industry players have also approached NEPRA regarding the revision in tariff.
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